EOG Resources has quietly leased more than 130,000 acres in Avoyelles, St. Landry and Pointe Coupee parishes and has begun fracking its first well in the Louisiana section of the oil-rich Austin Chalk.
The formation stretches around 600 miles from the Mexico border through Texas and across the middle of Louisiana. But it has been 20 years since the Louisiana piece of the formation has seen much in the way of leasing activity. EOG's first well, in Avoyelles Parish, was drilled 16,700 feet deep with a horizontal section a little over 5,000 feet long.
Rumors are already running rampant about how many wells the company plans to drill and how much the first well is producing — something that happened even before the well was drilled, said Kirk Barrell, president of New Orleans-based Amelia Resources. But it will be weeks before the initial production numbers are available and months before EOG is comfortable with the wells' decline curve, the method oil producers use to estimate reserves and predict production.
"It's way too early to speculate, but I'd say the industry shares my confidence in EOG. They're so good at what they do. If anybody can do it, they're the ones," Barrell said. "This is a blessing and gift to Louisiana to have them show up, without question."
EOG officials could not be reached for comment.
Interestingly, the Eagles 14H-1 is on EOG's shallowest acreage. The company has leases where the chalk's oil lies 19,000 feet below ground, Barrell said.
In addition, the Austin Chalk lies 800 feet to 1,200 feet above the Tuscaloosa Marine Shale, he said. Success in the Austin Chalk could possibly rejuvenate activity in the TMS.
Activity in the Tuscaloosa Marine Shale, the oil-rich formation that straddles Louisiana's midsection, dried up when oil prices plummeted three years ago. At the time, the TMS wells were the most expensive in the country at $10 million to $11 million.
Black gold has turned to red ink for major players in the once promising Tuscaloosa Marine Shale.
The cost of the wells and the issues that arise from drilling so deep and under such high pressures are the main obstacles to EOG developing its Louisiana Austin Chalk acreage, said Barrell, who is also the author of the Tuscaloosa Trend blog. His company is assembling acreage in the formation.
However, EOG has been testing its acreage in Texas over the last year, and the results appear promising. In the first half of the year, EOG completed 14 wells in the Texas portion of the Austin Chalk. The 30-day initial production rates for those wells averaged more than the equivalent of more than 2,600 barrels of oil.
Barrel described the wells in Karnes County as "amazing," with some initially testing at 9,000 barrels per day.
In a blog post on Seeking Alpha, analyst Nikolai Gouliaev estimated the initial investment for EOG's recent Texas Chalk wells at $4.6 million, and the return on investment at more than 200 percent